Feeds:
Posts
Comments

Posts Tagged ‘opportunity’

JBSJBS spreads its wings
By Cluck, moo, oink, ka-ching – The Economist

UNLESS you work with quadrupeds, it may have escaped your notice that a Brazilian company, JBS, is about to become the world’s largest
processor of meat. Its recent acquisition of Pilgrim’s Pride, a big
chicken processor in America and Mexico, and a pending merger with
Bertin, another Brazilian firm, will soon give it bigger sales than
Tyson Foods, the American firm that currently claims the top spot.
Other Brazilian names–Vale in mining, Embraer in aviation, Petrobras
in oil–may be more famous. But JBS is now the second-largest
private-sector company in Brazil by sales, after Vale. And a large
majority of its sales come from outside the country.

This is a stunning transformation for a business that began life in
Goias state 56 years ago with a slaughterhouse that could butcher just
five cattle a day. Its founder, Jose Batista Sobrinho, used to carry
sides of beef on his back to market, according to a friend. The
expanded firm will slaughter more than 140,000 animals a day and employ 129,000 people. Mr Batista’s three sons still control and run the
company, although 49% of it is publicly traded.

The mixture of family control and rapid expansion is unusual in
Brazilian agriculture. Many cattle-ranchers operate in the informal
economy and lots of slaughterhouses do not pay taxes, making the
industry difficult to consolidate. As in other parts of the world,
family-run agricultural firms in Brazil tend to focus on keeping things
intact for the next generation rather than betting the farm.

JBS has behaved differently, bringing in professional management and
expanding through ambitious acquisitions from an early stage. Some say
the company has been too aggressive. It was fined 15m reais ($8.4m) in 2007 for anti-competitive behaviour by Brazil’s antitrust regulator,
although it recently improved its image by agreeing to forgo buying
cows raised on deforested land.

GADOAn international shopping spree has brought the company big operations in Argentina, Italy, Mexico, America and Australia. But none of the company’s previous buys compares in size to its purchase in 2007 of Swift, the third-biggest processor of beef and pork in America and the biggest processor of beef in Australia. With it came a lesson in the politicking that can hamper big foreign acquisitions.

The Ranchers-Cattlemen Action Legal Fund lobbied against JBS before the antitrust committee of America’s Senate, warning of price-gouging of farmers and anti-competitive behaviour, and got a sympathetic hearing. But in the end American regulators approved JBS’s purchase of Swift, just as they approved the Pilgrim’s Pride transaction in mid-October.

Part of the resistance to JBS in America has come from the
distinctively Brazilian way in which the firm is financed. Brazil’s
national development bank, BNDES, has a mandate to promote the
international expansion of Brazilian companies, among other things. It
is funded by a compulsory levy paid by companies and public-sector
bodies on each worker they employ. BNDES bought 13% of JBS’s stock in 2007 as part of a capital-raising that allowed it to buy Swift. It also
provides long-term loans to the company. One way around the
public-relations problem this creates is to buy struggling companies
like Pilgrim’s Pride, which JBS is rescuing from bankruptcy.

A far bigger problem for JBS is how to integrate all its new operations
into a coherent beast. This will be a big test for the Batista brothers
and for Brazil’s tropical brand of capitalism, which mixes family
control with traded stock, and finance from state-run banks with
foreign acquisitions. Brazilian companies in other industries are
watching how JBS gets on and plotting similar moves themselves.

Advertisements

Read Full Post »

From Reuters (Tais Fuoco)

* Q4 net income jumps to 215.5 mln reais vs 26.2 mln

* 2008 profit 389.7 million reais vs loss 99.8 mln

* Sees Brazil’s wireless market continuing to expand

* Seen “a small growth” in January

Brazil’s largest mobile phone company Vivo Participacoes (VIVO4.SA)(VIV.N) said on Friday its fourth-quarter profit surged nearly ten-fold because of a sharp increase in new users and as it kept costs in check.

The company’s chief executive Roberto Lima said the profit surge in the fourth quarter was due to changes in its subscriber and pre-paid telephony offers and “very rigorous” cost controls, as it renegotiated contracts with suppliers.

Vivo, a joint venture of Portugal Telecom (PTC.LS) and Spain’s Telefonica (TEF.MC), said net income rose to 215.5 million reais ($94.1 million) from 26.2 million reais in the fourth-quarter of 2007.

For all of 2008, Vivo made a profit of 389.7 million reais, the best year since the company was formed in 2003, compared with losses of 99.8 million reais in 2007.

“Vivo had a few illnesses in its infancy but today it’s growth is healthy,” Lima said in an interview with Reuters.

Vivo added 2.668 million new mobile phone users in the fourth-quarter, bringing its total user base at the end of 2008 to 44.95 million people.

The jump in new wireless clients helped boost sales by 14 percent to 4.27 billion reais in the fourth quarter, Vivo said. Sales for all of 2008 totalled 15.8 billion reais.

Lima said the company’s growth could slow in 2009 but he believed Brazil’s wireless market would continue to expand.

“This is a sector that has been growing in the double digits since its creation. Even if it grows 10 percent, it’s still a fantastic rate,” he said, pointing out that any growth achieved was on the basis of an already large customer base.

He said the company had seen “a small growth” in January this year over the first month of 2008.

Earnings before interest, taxes, depreciation and amortization (EBITDA) rose 43 percent to 1.39 billion reais from 978.9 million in the final quarter of 2007.

EBITDA as a percentage of sales, a measure of profitability widely followed by analysts, jumped 6.6 percentage points to 32.7 percent in the fourth-quarter.

Read Full Post »

Spring Wireless has just established its U.S. headquarters in Seattle. The company is one of the fastest growing ventures in the mobile enterprise space and was originally founded in Sao Paulo, Brazil in 2001. It has operations across the Americas, Europe and Asia.

Brazilian investment in the USA

Brazilian investment in the USA

“We see great potential in the U.S. market, which has traditionally lagged behind Europe and Latin America in mobility. Spring Wireless has been at the forefront of the mobile explosion in markets outside of the U.S. and we’re excited to support our global customers operations in the U.S.,” said Marcelo Condé, Chief Executive Officer of Spring Wireless. “With more than 220 customers worldwide, we understand the needs of global companies. Our move into North America will help us better serve our U.S. customers and help us extend into new markets as we continue to expand our business globally.”

In August 2008, Goldman Sachs, New Enterprise Associates (NEA) and Brazilian investment firm, Ideiasnet, invested $66 million in Spring Wireless to fuel its worldwide expansion and help fund future acquisitions. In connection with the financing, Spring Wireless’ Board of Directors has grown to include Raheel Zia, vice president of Goldman Sachs Principal Investment Area, and Patrick Kerins, general partner at NEA.

In addition to its new Board members, Spring Wireless has also named a U.S. management team including Shakil Haroon, who will serve as Spring Wireless USA general manager. Prior to joining Spring Wireless, Haroon spent 10 years at software startups and more than 10 years in sales and management at Intel and Microsoft.

Additionally, Liron Shaked will serve as vice president of business development and corporate marketing and Kelly Malone will serve as vice president of sales for Spring Wireless USA. With more than 12 years of international experience in both corporate and startup environments, Shaked will oversee strategic alliances, global partnerships, channel development and global marketing initiatives for Spring Wireless. Malone, who prior to joining Spring Wireless led the Microsoft sales team responsible for supporting the development, marketing and sales of Motorola smart phones, rugged hand-held computers and set-top-boxes worldwide, will head up U.S. sales.

Spring Wireless has been called the largest and fastest growing company in the mobile enterprise space and was recently identified as a leader in the Gartner Magic Quadrant on Mobile Enterprise Application Platforms. Spring Wireless helps connect businesses, its employees and customers to the information they need, when they need it. The company offers a robust platform, prebuilt applications and critical services, enabling greater interoperability for customers than any of its competitors. It works with more than 180 devices, multiple operating systems and an array of common business applications.

As the single point of contact for its clients, Spring Wireless deploys and manages the devices, software and services companies require to go mobile, removing the need for global companies to seek out multiple vendors in different geographical areas. The company provides a complete solution with faster deployment times and lower total cost of ownership than traditional mobile providers, reducing deployment times by up to 50 percent and total cost of ownership by up to 35 percent in some cases.

Read Full Post »

The property market in Brazil has celebrated the news that a new record growth has been achieved, to show that the credit crisis has not reached the South American country. Housing credit has closed 2008 with 299.746 properties financed, the highest number ever and a rise of up to 53% over 2007.  According to ABECIP (Brazilian Association of Property Credit Institutions and Savings Accounts) , total amount of mortgages achieved over US$ 13 billion in 2008, a figure 64% higuer than the previous year. Only in december, total mortgage amount rose 36% in relation to november.

As The Move Channel has reported, as a consequence of the strong economy, prosperity levels are rising fast in Brazil, with sharp increases in housing demand. In just two years, 23 million people have risen to prosperity level C (middle class), which now counts 85 million people. This middle class has a monthly income between two and five times the official minimum wage.

With insufficient first home housing stock to satisfy local demand, Brazil currently has an estimated housing deficit of a minimum of eight million properties.

The middle classes are expected to purchase between 1,000,000 and 1,200,000 units per year until 2015. Fuelling demand further is the fact that for the first time in 25 years mortgages are available to Brazilians.

Mortgages account for only two per cent of GDP in Brazil, versus 65 per cent in the United States and 74 per cent in the UK, so consumers aren’t feeling the effects of credit squeeze. Massive growth in this sector means that domestic mortgages are predicted to increase by up to 600 per cent by 2014.

With this in mind it is clear that the first residence market within Brazil’s regional cities is a major investment opportunity and no region has seen faster growth that the North East.

In Natal for example, a local residential 100 square metre two bed room villa with a secure gated community can cost around 180,000 Reais (around £54,000) and deals can include optional rental guarantees of six per cent for four years and guaranteed buy back agreements from the developer.

As an investor, this means there is an opportunity to invest in well located local property that has a well defined target market and exit strategy, attracting middle class tenants and buyers.

Read Full Post »

The global financial crisis is not expected to lead to a major economic downturn in Brazil, a new study has concluded. According to the Organisation for Economic Cooperation and Development (OECD), prospects for the South American country remain favourable in comparison with many other countries.

Indeed, the OECD’s composite leading indicators showed that the nation had experienced a decline of just 2.9 points in the last year. This compares with 7.6 points in the euro area and 8.7 points in the United States. The figures were based on various measures of economic activity, such as output in the industrial sector.

Meanwhile, the Brazilian central bank has polled 100 economists in an attempt to determine the likely rate of growth in 2009, Bloomberg reports. Respondents to the survey predicted on average that the economy would expand by two per cent this year.

Read Full Post »

Brazil’s Embraer, fourth largest aircraft manufacturer in the world, has announced it is doing really well in spite of the crisis. Associated Press has reported the company delivered 204 jet planes last year, a 21 percent increase over the 169 jets delivered to buyers a year earlier.

The jet maker also announced it has $20.9 billion in firm orders for its planes as of Dec. 31. In 2008, the company delivered 162 midsize jets used for regional routes, 36 executive jets and six jets for military and government customers.

Embraer was Brazil’s largest exporter from 1999 to 2001 and the second largest in 2002, 2003 and 2004. It currently employs more than 23,509 people, 87.7% based in Brazil.

Read Full Post »

jetblueJetBlue or Azul Linhas Aereas, one of the leading low-cost carriers in the world,  started its operations in Brazil this week to enter a underexplored and potential gold mine market in South America. The airline was founded by David Neeleman (right) with $150m from American and Brazilian investors  with orders of up to $1.4 bi for 36 jetliners from Embraer (Brazilian Aviation Company).

Below is an excerpt from an article published on the Wall Street Journal by Susan Carey.

David Neeleman, founder of JetBlue Airways Corp., launched his fourth low-cost airline — this time in Brazil — defying poor markets for aircraft financing. Azul Linhas Aéreas Brasileiras SA started service Monday with four jetliners and plans to acquire four more by next month. It had originally planned to start operations in January but moved up its debut to capitalize on the peak holiday season.

Mr. Neeleman said frozen credit markets make this “the worst time ever to finance a plane.” But he said Azul is leasing six aircraft, all directly or indirectly from JetBlue, another Embraer operator, and managed to get financing from the Brazilian Development Bank and a German bank for a few more aircraft. “We have five more to go,” he said in a telephone interview from Salvador de Bahia. “We’ll get it worked.”

The 49-year-old airline executive, who speaks fluent Portuguese and holds both U.S. and Brazilian citizenship, is Azul’s chairman and holds a 20% equity stake and 80% voting control in the venture. A Brazilian retailing executive was recruited as president.

One target market is Brazilians who don’t travel at all, as well as those who take about 250 million trips a year on long-distance buses. As a result, Azul’s cheapest fares, purchased 21 days in advance, are similar in price to bus tickets. Its lowest one-way fare from Campinas to Salvador de Bahia is 209 reals, or roughly $87, for a two-hour flight. The bus takes 33 hours.

Read Full Post »

Older Posts »